Insipid Phase In Equities Is Only Temporary
Sadhak: Dhanavarsha (8) was launched in August 1 and was open for subscription till September 14. We could manage to collect Rs 70 crore mainly on the strength of our investor services network. The marketing infrastructure of the fund was able to convince the investors about the superiority of a mutual fund product as opposed to other financial products. The seven area offices of the asset management company focussed on client servicing and in the process also strengthened investor confidence in mutual fund products.
BS: What, according to you, would be the future outlook for the equity market, for the coming one year?
Sadhak: I am of the opinion that the equity market will revive in another six to eight months. Stock market movements are interlinked with liquidity and money supply in the system. Following the government decision to allow foreign institutional investors to have an exposure of up to 100 per cent in debt instruments, it is expected that FIIs will be investing in this sector in a big way. Assuming this scenario, it can be estimated that funds will be available cheaper for good and better corporate entities. This would, in turn, result in a good show in the bottom line of corporates, and the equity markets will thrive. The fact that the current high rates of institutional and corporate bonds is also expected to come down would also propel investors back to the equity market.
BS: What is the future of the domestic mutual fund industry?
Sadhak: The mutual fund industry is currently passing through a critical phase. Because of the dull primary market, investors have somewhat lost faith in mutual fund schemes. However, according to my estimate the dull phase in equities is only temporary, and once this is over, retail investors would increasingly invest in mutual fund schemes.
I am very optimistic about the mutual fund industry in India and according to me, household savings in financial assets will cross Rs 2,90,000 crore during the current financial year. The corresponding figures during 1994-95 was Rs 135,348 crore. If the mutual fund sector can mobilise at least 10 per cent of this amount, then the total collections could touch upwards Rs 29,000 crore in the coming months.
BS: When would the primary markets look up?
Sadhak: The improvement of primary market conditions is linked to the boom in the secondary market. Once FIIs bring in more funds in the domestic equity market, a portion of it willgo into the primary equity market. Iinvestors who had earlier put their hard-earned money in primary issues earlier, have to be given some profits before they come back to the equity market. It is not that all listed companies will give adequate returns, for there will be quite a handful for which investors and analysts will have to do revaluation. In short, only the good scrips will move up while others (non-pefrorming stocks) would be ignored.